The mock 17th century English manor house is a source of Yaffe's most recent legal entanglement. Boston's Sovereign Bank accuses him of financing the home by fraudulently tapping into collateral he put up to secure a $35 million business loan.

In court documents filed this week, the bank suggested Yaffe cashed in $12 million to $15 million of precious coins that National Gold Exchange had set aside as surety for the business loan.

He used the proceeds to build the mansion and crowned the misdeed by cooking National Gold Exchange's books to conceal the exchange, the bank said.

Sovereign recently called due the $35 million loan, and a judge this week allowed the bank to seize millions of dollars worth of coins pending the outcome of the lawsuit.

Yaffe is struggling to keep the business running after his coins were confiscated, said Daniel Saxe, Yaffe's lawyer. The business is co-owned by his brother Alan Yaffe. National Gold Exchange bills itself as "the world's largest rare foreign and United States gold coin and silver currency wholesaler."

"All I can say is we were shocked. This banking relationship, which goes back 14 years, has never been a problem before," Saxe said. "Something spooked them to do what they did."

It's easy to figure out who did the spooking. Sovereign got the tip about the Yaffe's mansion from David Hammer, an attorney who has represented Paul Bilzerian, the former corporate raider who lives near Yaffe in Avila.

Bilzerian was convicted in 1989 of securities fraud and spent more than a year in prison. The Securities and Exchange Commission has tried to collect more than $60 million in illegal profits, but Bilzerian has alleged for years that he's broke.

The estate Bilzerian built in Avila rivals Yaffe's for being the largest mansion in the Tampa Bay area.

"I am a Florida lawyer who has become aware of some extremely sensitive information that I believe your institution is entitled to know," Hammer wrote in a letter dated June 30 that was also forwarded to the U.S. Attorneys Office in Tampa.

"I am writing to express my concern that NGE has been defrauding Sovereign Bank for the past several years."

It's not the first time the Bilzerian family and the Yaffes have clashed. In 2007, Bilzerian's family sued the Yaffes over a busted business deal. The Bilzerians run a company called Caligula Corp. According to court filings, Caligula was supposed to raise capital for National Gold Exchange.

Hammer didn't return a call from the Times on Friday. His staff said he was "under the weather." Bilzerian couldn't be reached for comment. Sovereign also declined comment for the story.

Sovereign does business in eight Northeastern states and is a subsidiary of Banco Santander, based in Madrid, Spain. After receiving the tip from Bilzerian's lawyer, Sovereign employees made a surprise visit on July 10 to Yaffe's business on North Dale Mabry Highway to inventory the coins.

The bank said the audit uncovered a shortfall, which, combined with recent bounced checks floated by National Gold Exchange, raised suspicions. In court documents, Sovereign said the Yaffes had also lost $881,000 trading gold futures in 2008.

As a result of the investigation, Sovereign Bank discovered "facts which support the conclusion that NGE is engaging in, or is about to engage in, conduct that may place Sovereign Bank's collateral in danger of destruction, concealment, waste, removal from the state, removal from the jurisdiction of this court or transfer to an innocent purchaser."

Saxe denies any wrongdoing and said National Gold Exchange is current in repaying its loan. He'll answer the bank's complaint soon, though the case could take a long time to resolve.

"I don't want to litigate this case in the press, but we very vigorously dispute the factual allegations," Saxe said.

Time staff writer Colleen Jenkins contributed to this report.

Major gold dealer in hot water with bank over $25 million Tampa home 07/24/09
[Last modified: Tuesday, July 28, 2009 5:54pm]
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